Privately backed Flywheel Energy LLC has agreed to acquire from Southwestern Energy Co. the company’s Fayetteville shale business and related midstream gathering assets for $1.865 billion in cash.
Southwestern will divest 915,000 net acres, 4,033 operated producing wells, 3.7 tcf of proved reserves as of yearend 2017, anticipated production of 225-230 bcf in 2019, and associated midstream gathering systems and compression.
Flywheel will assume $564 million of contractual obligations, with Southwestern responsible for some of the potential obligations up to $126 million related to unused transportation through 2020.
Bill Way, Southwestern president and chief executive officer, said the deal represents “a pivotal and deliberate step” towards its effort to reposition the company “to capture greater returns from our higher-margin Appalachia assets.”
Southwestern expects to deploy as many as 6 rigs in 2019, generating total production growth of 8-12% and liquids growth of 15-25%, with activity weighted toward southwestern Appalachia’s high margin, liquids-rich inventory.
Southwestern has more than 475,000 (net) acres in the Appalachia basin prospective for Upper and Lower Marcellus, Upper Devonian, and Utica-Upper Point Pleasant development. Within Appalachia, Southwestern has identified over 40 tcf of gas equivalent resource, which includes more than 1,800 economic drilling locations below $2.75/Mcf gas and $50/bbl oil. The company’s yearend 2017 Appalachia reserves were 11.1 tcfe, 33% of which were condensate and natural gas liquids.